A typical consumer credit card account is structured as a single line of credit, which sets an overall cap, or credit limit, on the amount of credit to be extended to the consumer. The maximum credit limit associated with a typical credit card account, in turn, consists of three subcomponents, or “components of balance,” namely, a merchandise credit limit, a cash advance credit limit, and a balance transfer credit limit. The merchandise credit limit typically equals the maximum credit limit extended to the consumer, while the cash advance and balance transfer limits each constitute a percentage of the overall line of credit.
This typical consumer credit line structure, however, lacks the necessary flexibility to fully take advantage of each of the balance transfer and cash advance features of consumer credit. For example, if a consumer maxes out his or her merchandise credit limit, he or she is no longer able to take advantage of balance transfers or receive cash advances because the balance transfer and cash advance limits are part of the sole line of credit. Similarly, when a large cash advance is necessary in case of an emergency, a consumer with a maxed out merchandise credit limit is not able to cover the necessary cash expenses. The above lack of flexibility in consumer credit card account structure also negatively impacts the credit card issuer's ability to market promotional purchases, as well as promotional balance transfer and cash advance rates, in cases when the consumer's outstanding balance is either close to or is at the maximum credit limit. Overall, the shared line of credit account structure limits a credit card issuer's marketing options by allocating the available credit limit to one type of credit at the expense of another. Although a credit card issuer is typically able to raise the consumer's maximum credit limit, such activity may negatively impact the consumer's credit profile.